Medicare Watch

Advocates Urge Congress For SGR Fix That Does Not Hurt Beneficiaries

February 20, 2014

Beneficiary Advocates Urge Congress Not to Hike Brand Name Copayments for Low-Income Beneficiaries

Yesterday, the Medicare Rights Center and its partners submitted a letter to ranking members of the Senate Finance Committee and the House Committees on Ways & Means and Energy & Commerce urging Congress to abandon a proposal that would increase brand-name drug copayments for people with Extra Help as an offset to help pay for Medicare physician payment reform. Extra Help, also known as the Low-Income Subsidy, helps beneficiaries with limited incomes pay for the costs of their Part D prescription drug plan.

According to the letter, beneficiary advocates remain encouraged by efforts in Congress to repeal and replace the Sustainable Growth Rate (SGR) formula, the formula used to control Medicare payment to physicians, and move to emphasizing the value of care instead of the amount of care when determining payments to Medicare physicians. However, advocates are concerned about proposals to pay for the SGR fix through higher health care costs for people with Medicare, like increasing copayments for people with Extra Help. People with Extra Help live below or near the federal poverty level. They also tend to be sicker than those without Extra Help and take multiple medications. For these reasons, they cannot afford to pay more in the form of higher copayments for brand-name drugs.

Further, the letter also explains that increased cost sharing actually deters access to needed medications, increasing the likelihood of emergency room visits, ambulance rides and hospital stays. It also explains that increasing copayments is not the right tool to encourage the use of cheaper generic substitutes since it is health care providers that drive utilization of health care, not patients. Instead, advocates recommend educating providers and patients about medically-appropriate substitutions, streamlining the appeals process so beneficiaries are more informed about their rights to appeal higher cost sharing for brand name drugs, and more education about the efficacy of generic drugs as a substitute for more expensive brand-name medications.

Observation Status an Increasing Problem

A recent Reuters article discusses an increasingly common problem that many Medicare beneficiaries are facing—observation status. Observation status occurs when someone goes to the hospital and is not formally admitted. There is no time limit that a person can be kept under observation and there is no federal requirement that the patient be notified. This can cause a number of complications for Medicare beneficiaries. One of the most commonly encountered complications is that Medicare beneficiaries’ costs are generally much higher when they are under observation than when they are admitted as an inpatient. Another common complication is that skilled nursing facility care is only covered by Original Medicare if the beneficiary has been an inpatient in the hospital for three days or more. Beneficiaries who were under observation status do not count as inpatients; therefore, Medicare will not cover their skilled nursing facility care.

Unfortunately, the number of Medicare patients under observation increased from 920,000 in 2006 to 1.4 million in 2011. More alarmingly, the number of observation stays lasting more than 48 hours has increased by more than 400% from 2006 to 2011. The increased use of observation stays started when a new Medicare rule was implemented, which denied reimbursements to hospitals for admissions that are considered “improper.” This well-meaning rule led hospitals to be much more cautious with their admissions and drastically increase the use of observation stays.

There has recently been increased focus on the issue of observation stays. Central to this momentum is a bill introduced both in the Senate and in the House to allow time spent under observation status to count towards coverage for skilled nursing facility stays. In April, Medicare is planning on applying a new rule that requires doctors to admit anyone they expect to stay more than two midnights as an inpatient. Those expected to stay less than two midnights would be put under observation. Many advocacy groups see this as a flawed and incomplete solution to the beneficiary challenges presented by observation status. . According to the Medicare Rights Center’s President Joe Baker, “The new rule doesn’t really fix the problem.”

Medicare Reminder

If you have Original Medicare, it will cover you in full for days 1 to 60 that you are an inpatient in a hospital once you pay a deductible each benefit period. For days 61-90, you pay a daily coinsurance. Medicare pays for up to 60 additional hospital days in your lifetime with a high daily coinsurance, after you have used up your 90 days of hospital coverage in a benefit period. After you use up your 60 lifetime reserve days, Medicare will no longer pay for any coverage until you start a new benefit period.

A benefit period begins when you enter a hospital or a skilled nursing facility, and ends when you have been out of the hospital or skilled nursing facility (SNF), or stop receiving Medicare-covered skilled services at the SNF, for at least 60 days in a row. If you have a Medicare Advantage plan, it must provide the same coverage but your costs may be different.

Spotlight

This week, Medicare Rights is participating in a joint petition with Social Security Works to tell Congress not to shift added health care costs to people with Medicare. Committees in the House and Senate are working to fix a broken formula (known as the SGR) that helps determine how Medicare pays doctors. Unfortunately, some members of Congress want to pay for replacing the SGR by forcing people with Medicare to pay even higher health care costs. While replacing this formula is important for doctors and for people with Medicare, the petition asks congress to fix the SGR, but not at the expense of people with Medicare.

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The Medicare Rights Center is a national, nonprofit consumer service organization that works to ensure access to affordable health care for older adults and people with disabilities through counseling and advocacy, educational programs and public policy initiatives.